Lower increases in university fees is great news for students and for accessibility to education in South Africa, but fee increases are not just arbitrary numbers.
If universities are forced to reduce their revenues, somebody has to fill the gap or something has to give. In the 2014 financial year, Wits University received R1 303 million from tuition fees and an additional R1 169m from research contracts. Wages and salaries cost R2 519m and total expenditure for the year was R5 084m.
The vast difference between income and expenditure was covered by government subsidies and grants – R1 393m – leaving the university with a total net profit after tax of R61.28m (up from R4.8m in 2013).
Wits initially proposed to raise fees by 10.5 percent for 2016 and students reacted, demanding for fees not to be increased at all. Cheaper universities would be great for South Africa and would lead to higher skill levels and less inequality, but it comes at a cost. If we assume that Wits runs at full student capacity, then a 10.5 percent increase in fees equates to about the same increase in fee income.
Wits therefore stands to lose about R136m if they were to cancel their proposed fee increases.
It’s enough to tip the university into making a loss. It’s more than the university spends on repairs and maintenance (R135m), about double what it spends on books, journals and electronic media (R75m), and almost half of what the university issues in bursaries (R285m).
Expenses will also be substantially larger in 2015 due to salary rises and the depreciation of the rand. While official inflation in 2014 hovered around 6percent, Wits’ operating expenses increased 12.5 percent. Expenses unrelated to staff costs increased 20 percent.
The universities will need to dig deep to increase efficiencies and cut costs, but there is a limit to how much money this will save without compromising the quality of education.
Universities can also start to focus on greater income opportunities through research, but this will encroach on the independence of study and provide distorted preference to faculties such as engineering and science over the humanities.
The other option is higher state funding. But if this is the route we take, should government subsidise universities to drop fees for all students or should this money rather only be allocated to those who cannot afford tertiary education? Are the students protesting for lower fees or higher access to education? While the two appear similar they require different policy responses.
Government’s education expenditure is equivalent to 6 percent of gross domestic product. In the 2015 budget, R62 billion was allocated to post-school education and training – equivalent to 4.6 percent of the total budget and nearly a quarter of total spending on education.
It was unfortunate to see that a small number of students felt the need to tip a car, throw stones and burn tires, distracting the public’s attention away from the vast majority of students who were protesting peacefully and taking the issue forward.
But apart from a few exceptions, the protest has been a productive uprising for a cause far greater than just fees. It’s about removing the barriers to better education in South Africa. The work now is to figure out how we achieve it.
* Pierre Heistein is the convener of UCT’s Applied Economics for Smart Decision Making course. Follow him on LinkedIn/in/pierreheistein.
** The views expressed here do not necessarily reflect those of Independent Media.
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